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About Market Sectors

Markets do not exist as if waiting to be found and, then once discovered, to obey preexisting rules. Nothing could be further from the truth. Markets are messy, complex systems, institutionally rooted and filled with “historical accidents.” The computer communications market, for example, is not a history of one market but many, with the agents and artifacts of those markets to emerge first contributing to, as well as constraining, the opportunities of subsequent markets. For markets are much more than simply buyers and sellers engaged in economic exchange, as if ancient bazaars alive with the sounds of those hawking products or quibbling over prices. Modern markets are complex systems dependent as much on the negotiations among politicians and lawyers creating the institutional rules guiding market behavior as the decisions of managers of what products to innovate and how to sell them.

Markets begin with the vision of an entrepreneur to effect change, to create a different future. Entrepreneurs are not all independent actors but are also found working in existing firms. What makes them critical is their willingness to take the risks necessary to create new products or services and find the customers that make the entire effort worthwhile. If the economic potential they see is sufficient, many will be induced to act. The competition as well as cooperation among the many firms needed to coordinate the vast diversity of tasks necessary to create and sell products gives rise to market emergence. Market evolution depends on not only the creators and sellers of products but on the actions of customers, on the institutions necessary for the functioning of markets and on the many unpredictable factors that tip the balance of competition among firms or the advantages among products. For example, in the early years of the predicted emergence of the Networking market, there were so many competitors and product alternatives that customers were hesitant to buy. It was only after entirely new institutions for networking standards were created and standards published that the market grew from tens of millions of dollars to billions of dollars. In the process, the Networking market coalesced to a few dominant designs sold by an oligopoly of firms; a phenomenon to be observed repeatedly.

Three market sectors within computer communications will be observed: Data Communications, Networking and Internetworking. The Data Communication market emerged in roughly 1968 and consists of those firms that create and sell products to interconnect computers using the telephone network. The Networking market emerged in roughly 1979 when firms began introducing products that enabled high-speed interconnection among conterminous computers. The Internetworking market emerged in roughly 1984 with the introduction of products that enabled high-speed digital transmission among distant computers. By the end of 1988, leading firms participated in at least two market sectors.

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